subject: Choose Wisely Your Mortgage Rates [print this page] Choose Wisely Your Mortgage Rates Choose Wisely Your Mortgage Rates
Mortgage rates are basically offered as fixed or adjustable rates. Fixed rates assure the borrower of the same rates for the term of the loan. Scheduled monthly payments are the same regardless of market conditions. Normally, lenders don't confirm their rates until near signing date. As such, it's to the borrower's best interest to shop around and find the best deals available. If quoted a higher than market standard rate, be sure to ask why. If the lender is not able to justify his high rates, take your business elsewhere. Since interests are front-loaded, initial payments only cover a small portion of the principal. The longer the term, the more the overall payment is made to the lender.
Adjustable rates are pegged to current interest rates which vary according to market sentiments. These mortgages can be of shorter term than those with fixed rates. There is a margin to be added to the current interest rate. In the event of interest rate increases, an interest cap is also imposed to ensure rates don't exceed the cap. Payment amounts are not static and are revised on a periodic basis. The expected change in mortgage rates is calculated on an annual basis. Use the many mortgage calculators available to derive possible values.
Some lenders allow the coupling of fixed and adjustable rates within the same mortgage whereby borrowers initially pay based on a fixed rate and then switch to the adjustable rate until end of term.
Monthly payments should not exceed a specified amount of gross income. Use that as a rule of thumb when choosing between fixed or adjustable rates.
Since the jargon associated with mortgages can be overwhelming, it's advisable to read up what it entails. Numerous financial sites are available to provide advice and guidelines on the trend of rate change. Talk with family, friends or trusted real estate agents, if they even exist, to get a feel of what's out there.
